Employer Mandate: Employer Action Overview

Transcription

1 HEALTH CARE REFORM Employer Mandate:

2 Page 2 of 11 Immediatemmediate Employer Action Required Notes Nursing Mothers Employers must provide a reasonable break time for non-exempt employees who are nursing mothers to express breast milk for a period of one year following the birth of the child. Bathrooms are not considered an appropriate place. Employers are not required to pay employee during break unless state mandated. Grandfathered Health Plans Group health plans and health insurance policies that were in existence on March 23, 2010, are excused from some of the health care reform requirements. Certain changes in plan terms can, however, cause a plan to lose its grandfathered status. Yes, employers must establish an appropriate space for nursing mothers who are non-exempt employees. If the employer wants to maintain grandfathered status, the employer must provide the required annual notice and ensure any plan changes do not cause loss of grandfathered status. Available indefinitely. June 30, 2010mmediate Employer Action Required Notes Federal Retiree Reinsurance Program This program pays 80 percent of claims incurred for retirees (age 55-64) between $15,000 and $90,000. Payments must be used to lower costs for retirees. Applies to self-insured and fully insured retiree plans. National High-risk Pool This pool is for individuals who have not obtained insurance within the past six months due to a pre-existing condition. This pool will end on Jan. 1, 2014, when market reforms take effect that prohibit pre-existing condition exclusions and require guarantee issue. Applications may no longer be submitted to the Department of Health and Human Services (HHS) for the Retiree Reinsurance Program. No, informational only. Sept. 23, 2010 Employer Action Required Notes Adult Dependent Coverage Plans that offer dependent coverage must extend coverage up to age 26, regardless of marital status, residency, student status, etc. Grandfathered plans are no longer exempt if the dependent is eligible for other employer-sponsored coverage, effective Jan. 1, Lifetime Dollar Limits Lifetime limits on the dollar value of essential benefits are prohibited for plans beginning on or after Sept. 23, Yes, communicate to employees during open enrollment and amend plan documents accordingly. Provide required model notice. Yes, communicate to employees during open enrollment and amend plan documents accordingly. Provide required model notice.

3 Page 3 of 11 Sept. 23, 2010 cont d Employer Action Required Notes Annual Dollar Limits Annual limits on the dollar value of essential health benefits must meet the required minimums. The limits are graduated, with the minimum annual dollar limit for plan years beginning on or after Sept. 23, 2010, of $750,000; $1.25 million for plan years on or after Sept. 23, 2011; and $2 million for plan years beginning on or after Sept. 23, Annual limits on the dollar value of essential health benefits are prohibited after Jan. 1, Prohibition on Pre-existing Condition Exclusions (PCE) PCEs are prohibited for children under 19 years. (In 2014 the PCE exclusion extends to all persons regardless of age.) Rescissions Rescission of coverage (retroactive terminations) is prohibited unless there is evidence of fraud or material misrepresentation. Mandated Preventive Care Coverage Plans must provide coverage of certain preventive services with no cost sharing. Go to for an updated list of mandated preventive services. Does not apply to grandfathered plans. Emergency Services Coverage must be provided for emergency services at in-network cost levels, regardless of whether the provider is in or out of network. Does not apply to grandfathered plans. Primary Care Physician Designation Enrollees may designate any in-network primary care physician (PCP) as their PCP if one is required; a plan may not require a referral for OB/GYN services. Does not apply to grandfathered plans. Rate Review A new process requires insurers to justify rate increases. Carriers may be barred from participating in the state health insurance exchange if the state determines rate increases are unjustified. Small Business Tax Credit Certain small employers are eligible for a tax credit, provided they contribute at least 50 percent toward their employees health insurance. For tax-exempt small employers, the maximum credit is 25 percent (versus 35 percent for other employers) for tax years 2010 through Yes, communicate to employees during open enrollment and amend plan documents accordingly. Provide required model notice. Yes, communicate to employees during open enrollment and amend plan documents accordingly. Determine whether any children were previously denied for a pre-existing condition. Yes, communicate to employees during open enrollment and amend plan documents accordingly. Ensure coverage is not terminated retroactively, except in the limited conditions permitted. Yes, if the plan is not grandfathered, then communicate to employees during open enrollment and amend plan documents accordingly. Yes, if the plan is not grandfathered, amend plan documents and communicate to employees during open enrollment. Provide required model notice. Yes, if the plan is not grandfathered, amend plan documents and communicate to employees during open enrollment. Provide required model notice. Informational only. Yes, small employers should claim the credit starting with their 2010 annual income tax return if applicable.

4 Page 4 of Employer Action Required Notes OTC Medicine Over-the-counter drugs are not eligible for reimbursement under health flexible spending arrangements (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs) without a prescription. Revised Claims and Appeal Procedures New claims and appeal procedures have been expanded to include, among other things, external review by an independent review organization. Does not apply to grandfathered plans. The new procedures are being implemented in three stages, with various effective dates. For example, the 72-hour initial Adverse Benefit Determination notice and the Culturally and Linguistically Appropriate notice were not effective until plan years beginning on or after Jan. 1, The non-english version of the Culturally and Linguistically Appropriate notice requirement must now be provided to certain participants upon request. Cafeteria Plan Safe Harbor Small employers (100 or fewer employees) are allowed to adopt new simple cafeteria plans. These plans are treated as meeting the nondiscrimination requirements. HSA Penalty Increase PPACA increases the additional tax on HSA distributions that are not used for qualified medical expenses to 20 percent for distributions made after Dec. 31, Yes, communicate to employees during open enrollment and amend plan documents accordingly. Work with any third-party administrators to revise electronic payment cards. Yes, if the plan is not grandfathered, amend plan documents and communicate to employees during open enrollment. Develop new policies and procedures for internal and external appeals. Provide required model notice. Yes, small employer action is required if the employer would like to implement this plan design. Contact your advisor for more information. Informational only Employer Action Required Notes Medical Loss Ratio Rebates Insurance carriers that fail to meet the medical loss ratio (MLR) standards must provide a rebate to policyholders by Aug. 1 following the MLR reporting year. The first rebate checks must be sent by August New Women s Preventive Care Mandate Effective for plan years on or after Aug. 1, 2012, group health plans must provide coverage for certain women s preventive care at no cost sharing. Mandated coverage includes well woman visits, HPV testing, contraceptives and more. Religious-based nonprofits had until Aug. 1, 2013, to comply. Yes, if the employer receives a rebate check, the employer should determine what portion of the rebate, if any, constitutes ERISA plan assets and distribute such assets according to fiduciary rules. There are separate requirements for distribution of rebates sent to non-erisa plans. This is an ongoing requirement. Yes, if the plan is not grandfathered, then the employer should communicate the new coverage to employees during open enrollment and amend plan documents accordingly. This is an ongoing requirement.

5 Page 5 of cont d Employer Action Required Notes Employer W-2 Reporting Employers must begin tracking the aggregate value of health coverage provided to employees for purposes of reporting on Form W-2s. The aggregate cost of health coverage includes major medical, employer contributions to a health FSA, retiree coverage (unless no W-2 is issued) and certain employee assistance programs and fixeddollar coverage. There are many exclusions, including HRAs, HSAs and salary reduction contributions to health FSAs. There is an indefinite delay of implementation for employers that file fewer than 250 Form W-2s. Summary of Benefits & Coverage (SBC) Plan sponsors must provide a new document that summarizes plan information for easier comparison. Information provided includes covered benefits, cost-sharing provisions, and coverage limitations and exceptions. The SBC also provides information about how to access the Uniform Glossary. Effective for plan years beginning on or after Sept. 23, Summary of Material Modification Notice This notice must be provided to enrollees 60 days prior to any material modification to the information provided on the most recent SBC. Notice must be provided for only midyear material modifications. Patient Centered Outcomes Research (PCOR) Fee Issuers of certain health insurance policies and plan sponsors of self-insured group health plans must pay an excise tax of $1 per average number of covered lives to fund the Patient Centered Outcomes Research Institute. The tax increases to $2 the following year and will increase each year thereafter based on the projected per capita amount of national health expenditures. Effective for plan years ending after Oct. 1, Does not apply to HIPAA excepted benefits, but does apply to retiree-only plans. Yes, employers in cooperation with their payroll vendors need to quantify the value of health coverage to be included on Form W-2s beginning with 2012 compensation. This is an ongoing requirement. Yes, the plan sponsor must provide the SBC during open enrollment, at renewal and upon request within seven days. An insurance carrier or third-party administrator will administer; however, the employer must ensure the information is complete. HHS requires that the SBC conform to the template provided. The SBC may be provided in paper or electronic form in compliance with Department of Labor (DOL) electronic delivery requirements. This is an ongoing requirement. Yes, if self-funded, the plan administrator or plan sponsor must provide the SBC timely. If fully insured, carrier will administer. The summary may be provided in paper or electronic form and must include certain required content. Employers with self-insured plans (including HRAs and self-insured prescription drug plans) must file Internal Revenue Service (IRS) Form 720 to pay the excise tax by July 31 each year. The fee stops applying for policy/plan years ending after Sept. 30, (For calendar-year policies/plans, that means the fees would apply for calendar policy/plan years 2012 through 2018.)

6 Page 6 of Employer Action Required Notes Increased Tax on High Wage Earners There is a tax increase of 3.8 percent for high wage earners on passive income (investment income, capital gains, rent, etc.) and a 0.9 percent increase in Medicare payroll tax on earned income above certain thresholds. Threshold amounts are $200,000 advised gross income for individuals and $250,000 for families. Health FSA Maximum Contribution Limit Employee contributions to health FSAs are limited to $2,500 annually, effective for plan years beginning after Dec. 31, Notice of Exchange Employers are required to provide a notice to employees informing them of the existence of the insurance exchanges that will serve as a marketplace to buy insurance coverage. The notice will also describe the availability of tax credits and premium subsidies for qualified individuals. Employers may want to communicate information to employees. Work with payroll vendor to ensure compliance. Yes, employers should communicate change to employees during open enrollment and amend plan documents accordingly. Amendments must be adopted no later than Dec. 31, 2014, with a retroactive effective date. Yes, employers had until Oct. 1, 2013, to provide this notice to all employees, which coincided with the open enrollment period for exchanges. Employers must continue providing the notice within 14 days of a new employee s start date for employees hired after Oct. 1, Employer Action Required Notes Waiting Periods Group health plans may not implement waiting periods longer than 90 days. Annual Dollar Limits Annual dollar limits on essential health benefits are completely prohibited. Such limits are permissible for non-essential health benefits. Adult Dependent Coverage Grandfathered plans that offer dependent coverage were previously able to exclude those under age 26 who were eligible for other employer-sponsored coverage. This provision is no longer in effect. Yes, amend plan documents for first plan year beginning on or after Jan. 1, 2014, if existing waiting period exceeds 90 days. If plan is self-insured, amend plan design accordingly. Carrier will administer fully insured plan changes. All employers must amend plan documents for first plan year beginning on or after Jan. 1, 2014, to remove any remaining annual dollar limits on essential health benefits. Yes, grandfathered plans must revisit eligibility requirements and amend plan documents accordingly to remove eligibility exclusion for those dependents with other employer-sponsored coverage.

7 Page 7 of cont d Employer Action Required Notes Health Insurance Exchanges As of January 2014, a state-based or federally facilitated health insurance exchange is operational in each state. Health insurance coverage for individuals and small employer groups (groups of 50 or fewer) may be purchased through the exchanges. Individual Mandate Citizens and legal residents are required to maintain minimum essential coverage. Those without such coverage will be penalized in the form of a tax. Penalties will be phased in: $95 in 2014 or 1 percent of household income; $325 or 2 percent of household income in 2015; and then $695 in 2016 or 2.5 percent of household income; and then adjusted by cost of living thereafter. Premium Tax Credits Premium tax credits are available to eligible individuals and families with incomes between 100 and 400 percent of federal poverty level (FPL) to purchase insurance through the health insurance exchanges. Individuals are eligible if they do not have affordable or qualified employer-sponsored coverage available to them. Cost-sharing subsidies are also available through the exchange for lower income individuals in order to reduce out-of-pocket costs. The exchanges will administer the premium tax credits and cost-sharing subsidies. Guaranteed Availability of Coverage and Renewability Each health insurance issuer that offers health insurance coverage in the individual or group market (regardless of whether the coverage is offered in the large or small group market) is required to accept every employer and individual in the state that applies for coverage and desires renewal. No, informational only. No, informational only. No, informational only. No. Carriers will administer.

8 Page 8 of cont d Employer Action Required Notes Cost-sharing Limits Non-grandfathered group health plans must limit the maximum out-of-pocket limits to $6,350 for self-only and $12,700 for family coverage in These limits will be adjusted annually for inflation. In addition, the deductible for fully insured, small group, non-grandfathered plans cannot exceed $2,000 for a single coverage plan, or $4,000 for any other plan (with some exceptions). Effective for plan years beginning in Essential Health Benefits Package Effective for plan years beginning on or after Jan. 1, 2014, individual and small group health coverage must include the essential health benefits package, which means providing essential health benefits, setting limits on cost sharing and providing coverage at specified actuarial levels of coverage. Prohibition on Pre-existing Condition Exclusions (PCE) Group health plans are prohibited from imposing PCEs on any individuals, effective for plan years beginning on or after Jan. 1, Reinsurance Fee Beginning in 2014, each state that operates an exchange is required to establish a temporary reinsurance program for the individual market, to which health insurers and group health plans are required to contribute. The reinsurance program will be in operation from 2014 to There will be a national uniform contribution rate of $63 per covered life per year ($5.25 per month) payable in 2014 for major medical coverage, including for retiree-only plans and COBRA coverage. The rate decreases to $44 in For fully insured major medical coverage, insurers are liable for the contributions. They will presumably pass along the cost as part of premiums or other fees. For self-insured plans, the plan is ultimately liable for the contributions, although a third-party administrator can be used to remit the contributions on the plan s behalf. Small Business Tax Credit The available tax credit increases for certain small businesses, provided they contribute at least 50 percent toward their employees health insurance. For tax-exempt small employers, the maximum credit is 35 percent (versus 50 percent for other employers) beginning in Coverage must be purchased within the Small Business Health Options Program (SHOP) exchange. Yes, amend plan documents and coverage accordingly. No. Carriers will administer. Review plan documents and amend accordingly to reflect required coverage. Employers and insurers must continue to provide a Certificate of Creditable Coverage until Dec. 31, 2014, regardless of plan year. Self-insured employers and fully insured insurers will report the number of covered lives to HHS by Nov. 15. HHS will then notify the employer of its contribution by Dec. 15. The contribution will be due within 30 days after the employer or insurer receives the contribution notice. Yes, although small employers purchasing coverage through the SHOP exchange are limited to claiming the increased tax credit amounts for two consecutive years.

9 Page 9 of Employer Action Required Notes Employer Mandate Applicable large employers with at least 100 fulltime employees (including equivalents) during a six-month consecutive period determined by the employer in 2014 may be assessed a penalty under the employer mandate if at least one full-time employee (e.g., one working 30 or more hours/week) receives a premium tax credit in the state exchange. Employees qualify for a premium tax credit if their income is percent of FPL and their coverage is unaffordable or does not meet minimum value. Applicable large employers must report to the IRS on their employer mandate compliance obligations. The IRS will use this information to administer the employer mandate penalty. Speak to your advisor to calculate affordability of your plan in light of employee compensation and adjust contribution levels as necessary to avoid the penalty. Consider the long-term impact of compensation and composition of workforce (full time vs. part time). Draft employment policy concerning retaliation against individuals receiving premium tax credit. There are two types of potential penalties: (1) Penalty A applies to employers that do not offer any coverage; and (2) Penalty B applies to employers that offer coverage that is unaffordable (using one of three safe harbor methods ensuring coverage is not greater than 9.5 percent of household income) or does not meet minimum value (defined as 60 percent actuarial value). Penalty A equals $2,000 times the number of full-time employees, less the first 80. B equals $3,000 times the number of full-time employees receiving the premium tax credit. Penalty B is capped at the amount paid under Penalty A. Neither penalty is tax deductible. Transition relief is provided until 2016 for employers with full-time employees and equivalents who meet specific requirements to delay compliance. Non-calendar-year plans may be eligible for an additional delay if certain requirements are satisfied. Reporting on Health Insurance Coverage Any person who provides minimum essential coverage to an individual must report certain health insurance coverage information to the IRS. There are two types of reports: One applies to insurers and plan sponsors of self-insured plans; the other applies to applicable large employers and offering employers. The required reporting was delayed and is now considered optional for 2014 and will be required in Yes, employers must submit a relevant report of health insurance coverage to the IRS and must also furnish a written statement to covered employees.

10 Page 10 of Employer Action Required Notes Employer Mandate Transition relief for employers with full-time employees and equivalents ends. Such employers must comply with the previously described employer mandate requirements as of the first plan year beginning on or after Jan. 1, Applicable large employers must report to the IRS on their employer mandate compliance obligations. The IRS will use this information to administer the employer mandate penalty. Speak to your advisor to calculate affordability of your plan in light of employee compensation and adjust contribution levels as necessary to avoid the penalty. Consider the long-term impact of compensation and composition of workforce (full time vs. part time). Draft employment policy concerning retaliation against individuals receiving premium tax credit. Health Insurance Exchanges The state-based and federally facilitated health insurance exchange will be expanded to allow groups between 51 and 100 employees to purchase coverage in 2016 (if state allows). Yes, employers must submit a relevant report of health insurance coverage to the IRS and must also furnish a written statement to covered employees Employer Action Required Notes Health Insurance Exchanges The state-based and federally facilitated health insurance exchange will be expanded to allow groups over 100 to purchase coverage in 2017 (if state allows). No, informational only Employer Action Required Notes Cadillac Tax Plans Beginning in 2018, there will be a 40 percent excise tax on certain plans imposed on insurers and administrators of self-insured plans. To avoid the excise tax, the aggregate value of a health plan may not exceed $10,200 for single coverage and $27,500 for family coverage. The total aggregate value is equal to the reimbursement for FSAs or HRAs, employer contributions to HSAs and medical plans. If health care costs increase more than expected, the initial threshold will automatically adjust upward. Yes, review current plans to determine potential applicability of Cadillac tax and make adjustments to plan design as required prior to Consider compensation adjustments accordingly.

11 Page 11 of 11 Compliance Date Unknown Employer Action Required Notes Auto-enrollment Employers with more than 200 full-time employees must automatically enroll new full-time employees in one of the employer s health benefit plans and continue the enrollment of current employees, unless they opt out of coverage. The DOL has indicated that employers are not required to comply with this requirement until final regulations are issued and applicable. The effective date is currently unknown. Nondiscrimination Section 105(h) nondiscrimination requirements are currently applicable to self-insured plans and have been extended to govern fully insured plans under PPACA. This law prohibits employers from establishing eligibility and benefit rules in favor of the highly compensated individuals. Does not apply to grandfathered plans. Enforcement against fully insured plans is delayed until further guidance is released. Quality of Care Reporting Group health plans and health insurance issuers must submit an annual report to HHS addressing coverage benefits and provider reimbursement structures that may affect the quality of care in certain specific ways. The effective date is unknown. The Secretary of HHS was required to develop the reporting requirements no later than March 23, 2012, but no guidance has been released. Not at this time. When final regulations are released, revise enrollment procedures as necessary. Yes, if the plan is not grandfathered, determine whether any of the plan s eligibility rules have the effect of discriminating in favor of highly compensated employees. Change plan design as necessary when guidance is released. Yes, self-insured employers will have to provide appropriate reports. Insurance carriers will administer for fully insured plans. Guidance forthcoming. This material was created by National Financial Partners Corp., (NFP), its subsidiaries, or affiliates for distribution by their Registered Representatives, Investment Advisor Representatives, and/or Agents. This material was created to provide accurate and reliable information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Neither NFP nor its affiliates offer legal or tax services. (BP ) Copyright 2015 NFP. All rights reserved.